Which funds to use for my down payment and closing costs

[MikeJones2001]

I have about 120k in  Taxable account mostly in vtsax
I have about 100k in a Roth IRA and I think Ive contributed around 65k of that.
I also have around 40k in a savings account earning 3.5% right now.

My down payment and closing costs will be around 60k. I am wondering what funds I should use in order to make this down payment for my first home? I was thinking using my savings and maybe some of my Roth  IRA contributions but im not too sure.

[RWD]

Since you already have some funds in a taxable account you should tap those before giving up the tax advantages of a Roth. Once you withdraw from your Roth you can't put it back in.

Liquidating only $20k from taxable shouldn't be a significant tax event. If you used SpecID for determining basis there's a good chance you can choose lots that will have no tax hit at all, since stocks are down from their peak right now.

[ChpBstrd]

Agree with @RWD .

I would pay capital gains taxes before I tapped my Roth because there's no way to rebuild those Roth funds once you take them out. If you can tax loss harvest, even better. Check if your broker will specify which "lots" you're selling so that you can optimize tax loss harvesting or minimize taxes, whichever applies in your situation.

Regarding the savings account, is this the same as your emergency fund? If so, I would leave your efund intact and take all the money out of the taxable brokerage account. Especially as a homeowner you'll need a few bucks on hand when the HVAC goes out ($10k), the sewer line snaps in half ($2k), the refrigerator dies ($1500), and the water heater leaks ($1k).

[Wintergreen78]

I wouldn’t pull money out of the Roth, but I’d be comfortable pulling some from an emergency fund in order to minimize taxes. I would make it a priority to build the fund back up afterwards though.

[MikeJones2001]

Thanks to everyone for the replies. You guys always come through in the clutch

[Telecaster]

I'd use 100% of that cash.   In the event of an emergency you still have plenty of resources. 

[Dicey]

I would use $30k of the cash. New houses are expensive and you don't want to risk running up credit cards. $10k in reserves lets you make some payments, should the SHTF.

Take $30k from Taxable Investments. You can refill those buckets, but once you can't replace Roths once they're tapped.

You didn't mention income. Hopefully you will have plenty and the house is affordable.

Do Not Pay Cash. Get a 30 year, 5/1 or 7/1 ARM, whichever is cheapest. You can always refinance later.

Congratulations!

 

[phimag512]

Congrats on the new home! I actually have the same question, and after reading the responses about the Roth IRA, I'm unsure what to do.

$70k in Roth IRA - Contributed around $44k
$65k in Rollover IRA
$26k in taxable investments
$14k in money market account
64k salary

I'm still looking, but I'm hoping to find something this year or at the beginning of 2024. Looking at putting down $40-45k for dp & cc, most likely.

Is it better to take out of the Rollover, than the Roth or is that even a worse option? I was initially thinking of taking out some of the contributions $10-15k in the ROTH. Should I use the taxable investments and MM?

[RWD]

Congrats on the new home! I actually have the same question, and after reading the responses about the Roth IRA, I'm unsure what to do.

$70k in Roth IRA - Contributed around $44k
$65k in Rollover IRA
$26k in taxable investments
$14k in money market account
64k salary

I'm still looking, but I'm hoping to find something this year or at the beginning of 2024. Looking at putting down $40-45k for dp & cc, most likely.

Is it better to take out of the Rollover, than the Roth or is that even a worse option? I was initially thinking of taking out some of the contributions $10-15k in the ROTH. Should I use the taxable investments and MM?

I would prioritize this order:
1. Money market (no tax consequences, I assume)
2. Taxable investments (capital gains tax only, probably minimal)
3. Roth (tax-free, but you can't put it back in again)
4. Rollover (you will be taxed and possibly penalized if you tap this)

[phimag512]

Congrats on the new home! I actually have the same question, and after reading the responses about the Roth IRA, I'm unsure what to do.

$70k in Roth IRA - Contributed around $44k
$65k in Rollover IRA
$26k in taxable investments
$14k in money market account
64k salary

I'm still looking, but I'm hoping to find something this year or at the beginning of 2024. Looking at putting down $40-45k for dp & cc, most likely.

Is it better to take out of the Rollover, than the Roth or is that even a worse option? I was initially thinking of taking out some of the contributions $10-15k in the ROTH. Should I use the taxable investments and MM?

I would prioritize this order:
1. Money market (no tax consequences, I assume)
2. Taxable investments (capital gains tax only, probably minimal)
3. Roth (tax-free, but you can't put it back in again)
4. Rollover (you will be taxed and possibly penalized if you tap this)
[/quote

@MikeJones2001 Thank you for your advice!